During the Year Ended 30 June 2022, a Subsidiary Entity

During the year ended 30 June 2022, a subsidiary entity sold inventories to a parent entity for $50 000. The inventories had previously cost the subsidiary entity $45 000. By 30 June 2022 the parent entity had sold all the inventories to a party outside the group. The company tax rate is 30%. The adjustment entry in the consolidation worksheet at 30 June 2023 is:

A) $\begin{array}{llr}\text { Sales revenue }&\mathrm{Dr}&50,000\\\text { Cost of sales } & \mathrm{Cr} && 45,000 \\\text { Inventories } & \mathrm{Cr} && 5,000\\\text { Deferred tax asset }&\mathrm{Dr}&1,500\\\text { Income tax expense }& \mathrm{Cr}&&1,500\\\end{array}$
B) $\begin{array}{lll}\text { Retained earnings } & \text { Dr } & 3500 \\\text { Income tax expense } & \mathrm{Dr} & 1500 \\\text { Cost of sales } & \mathrm{Cr} &5000\end{array}$
C) $$\begin{array} { c l c c } \text { Retained earriirigs } & \mathrm { Dr } & 5000 \\\text { Irventories } & \mathrm { Cr } & & 5000 \\\text { Deferted tax asset } & \mathrm { Dr } & 1500 & \\\text { Retained earriirgs } & \mathrm { Cr } & & 1500\end{array}$$
D) No entry is required

Correct Answer:

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